Bitcoin, Bit-by-Bit, Pitches Silicon Valley Against Washington As Our True Capital
These developments are unlike anything out of Washington, usually a bastion of the status quo and the retrograde. So when the leaders of Silicon Valley start making amazing claims about something it pays to pay attention. Silicon Valley’s latest Next Big Thing: the mysterious bitcoin.
In the New York Times, technology titan and venture capitalist Marc Andreessen writes:
Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it.
On the other hand, technologists – nerds – are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it.
Eventually mainstream products, companies and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start.
What technology am I talking about? Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014.
Those of us who are not technogeeks but wish to understand this phenomenon now have two wonderful “guides for the perplexed.” Dominic Frisby’s gripping thriller-like narrative Bitcoin and Jeffrey Tucker’s lyrically philosophical Bit By Bit. These two works teach us everything we wanted to know about bitcoin but were afraid to ask.
Apart from a certain High Coolness factor, though … why should we care?
As a recent article in the New York Observer, The Race to Replace Bitcoin, An epic battle between two bitcoin 2.0 contenders grips the crypto world neatly puts it:
The coining of digital money (“cryptocurrency”) has the potential to be the most important financial development of this century. On one side are governments, fiat currencies and the world banking industry. On the other side are hundreds of young companies backed by brilliant cryptographers, complex programming and security protocols and varying degrees of anti-establishment fervor.
… The result of this fight will decide, among other things, the fate of developing economies, access to financial services, inflation, terrorism, all forms of economic crime from insider trading to drug dealing, the ability of governments to spy on citizens’ financial transactions, tax collection and the relationship between governments and the governed.
The best-known cryptocurrency is Bitcoin. … Bitcoin has a massive head start and has already developed significant brand equity. But among aficionados, there is wide consensus that the weaknesses in Bitcoin are fatal and unfixable. …
There will be a “Bitcoin 2.0,” and it will likely emerge from one of the hundreds of currencies that have been started in the past couple years.
I came out of it with the impression that Bitcoin lacks “moneyness” (especially as its profound volatility makes it unsuitable as a unit of account, the preeminent quality of moneyness). Bitcoin seemed to me more a “fiat commodity” than an anarchic “fiat currency.” This impression was reinforced by the analysis of Prof. Kevin Dowd and journalist Martin Hutchinson at the 32nd Annual Monetary Conference presented by the Cato Institute. Their paper crisply and unambiguously was entitled Bitcoin Will Bite The Dust.
That said, the lack of moneyness of Bitcoin may be beside the point.
It may prove itself a “fiat commodity” with superpowers.
Everett Rosenfeld, at CNBC, writes Forget currency, bitcoin’s tech is the revolution:
But forget everything you know, because the technology underlying bitcoin has the potential to be a much greater disruptive force than the cryptocurrency itself. Investors and technologists think the technology could replace huge aspects of the financial and insurance industries, and eventually even corporate management teams. In fact, big names like Google and IBM are reportedly already looking to invest in applications.
“Bitcoin is a token, a currency, but that’s not all it is. That’s the first of many many applications of this blockchain technology,” said Jeff Garzik, one of five bitcoin core developers who have taken over maintenance of the technology from mysterious creator Satoshi Nakamoto. “[Currency] is not the killer app, it’s just the first app.”
This money system will grow bigger and better. It’s going to improve and increase commerce. It could unleash a huge global economic boom, as good for developing nations as it is for the developed.
The Bitcoin technology has laid the foundations for a dramatic increase in exchange. And, of course, exchange is the crucial process by which mankind prospers and progresses.
As compared with the dollar and dollar-based systems of payment transfer, we are looking at a Maserati as compared with a Model T. Fees are near zero, time of transfer is very quick, exchange takes place peer-to-peer with no third party, you move real property and not trust relationship, there is perfect transparency, quantity of creation is limited, divisibility is potentially infinite, and anyone in the world with an Internet connection can use it.
And yet we don’t live in the grand sweep of history. We live day to day, right where we are, and we improve what we can, when we can, striving to make our lives and our world just a bit better at the margin. It is the accumulation of all of these efforts, stretching across the globe and spread out over time, coordinated through emergent institutions, that have remade our daily lives in little more than one generation, granting more people access to economic opportunity and empowerment than at any time in history.
We see this in the data — income, education, health, longevity, peace — and we feel it in our hearts.
Washington, as is its wont, likely will be slow-footed in responding to, or ham-handed in attempting to thwart, the next big leap in technology. Between the capital of the past, Washington, and the capital of the future, Silicon Valley, now unfolds a colossal drama. This clash will affect your life. Pay attention.
Read Dominic Frisby’s gripping Bitcoin, indispensable to understanding exactly what is occurring on the most important battlefield in the world — the battlefield of ideas. Read Jeffrey Tucker’s Bit By Bit, a delight of a book, invaluable to understanding just how sky high are the stakes.
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Ralph Benko is senior advisor, economics, to American Principles in Action’s Gold Standard 2012 Initiative, and a contributor to he ARRA News Service. The article which first appeared in Forbes was submitted for reprint by the author.
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